On Thursday, Oppenheimer adjusted its outlook on Frontdoor Inc. (NASDAQ:FTDR), increasing the price target to $50 from $44, while retaining an Outperform rating on the stock. This revision follows Frontdoor's second-quarter financial performance, which surpassed analyst expectations.
Frontdoor reported a second-quarter EBITDA of $158 million, exceeding both Oppenheimer's projection of $134 million and the consensus estimate of $132 million. The company's revenues reached $542 million, also outpacing the anticipated figures of $536 million by Oppenheimer and $537 million by consensus. The growth in revenue was primarily fueled by a 6% year-over-year increase in the renewals channel, attributed to strategic pricing decisions, though this was partially balanced by reduced volumes.
Despite a 14% year-over-year decline in real estate revenues due to a softer home warranty market and low home turnover rates, Frontdoor's management has upgraded its full-year 2024 guidance. The adjusted EBITDA forecast now stands at $385 million to $395 million, up from the previous range of $360 million to $370 million. This optimistic outlook is supported by an anticipated gross margin that is slightly above 51%.
The direct-to-consumer (DTC) segment also experienced a 14% dip, reflecting a broader decrease in demand for home warranties, which may be a consequence of financial pressures on consumers. Nevertheless, Oppenheimer has increased its EBITDA estimates for Frontdoor for fiscal years 2024 and 2025 to $389 million and $407 million, respectively, up from the former estimates of $365 million and $387 million.
In conclusion, the financial analyst firm remains confident in Frontdoor's performance and prospects, as evidenced by the raised earnings estimates and sustained Outperform rating. The company's effective pricing strategies and cost management appear to have contributed significantly to its robust second-quarter results and improved financial outlook for the year.
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